Re No Va Land Investment Group Corp

• Jurisdiction: Singapore
• Judge: James Michael Peck IJ
• Judgment Date: 07 June 2024
• Neutral Citation: [2024] SGHC(I) 17
• Court: International Commercial Court (Singapore)
• Docket Number: Originating Application No 6 of 2024 and Summons No 19 of 2024
• Hearing Date: 26 April 2024
• Citation: [2024] SGHC(I) 17
• Year: 2024
• Plaintiff Counsel: Tay Kang-Rui Darius (Zheng Kangrui), Nee Hoong Yi Adriel, Charlene Goh Kai Ning, Oh Shi Jie Jonathan, Loh Song-En Samuel (BlackOak LLC)
• Defendant Counsel: Koh Wei Lun (Hogan Lovells Lee & Lee),Stephen E Hessler, Alexius Chong, Shashwat Tewary, Elley Lee (Sidley Austin LLP)
• Subject Matter: Companies,Schemes of arrangement,Jurisdiction over foreign companies,Sections 63 and 246 of the Insolvency, Restructuring and Dissolution Act 2018,Disclosure,Section 71 Insolvency, Restructuring and Dissolution Act 2018
• Published date: 10 June 2024

James Michael Peck IJ: Introduction

These Grounds of Decision relate to a sanction order entered on 26 April 2024 in connection with a pre-pack scheme of arrangement for a significant business enterprise incorporated and based in Vietnam. The application to sanction the scheme for No Va Land Investment Group Corporation (the “Applicant”) was brought pursuant to SIC/OA 6/2024 (the “Application”). Although the Application proceeded on an uncontested basis, this was the first ever cross-border pre-pack scheme filed in the Singapore International Commercial Court (the “Court” or the “SICC”), and the Court’s description of its experience with the Application constitutes useful precedent for the management and prosecution of similar restructurings that may arise in the future. These grounds include an analysis of disclosure obligations in relation to pre-packs that the Court hopes will be considered useful in future pre-pack restructurings.

Facts Background facts

The Applicant is a Vietnamese real estate investment holding company with 93 corporate affiliates (collectively, the “Group”) incorporated in and doing business within Vietnam.¹ The Group is one of Vietnam’s largest mid-market residential real estate developers.

Beginning in 2022, Vietnam’s real estate sector entered a cycle of distress impacting market participants including the Applicant, and this challenging business environment negatively impacted the Applicant’s performance and profitability,² leading, as conditions worsened, to liquidity constraints and an eventual payment default on 16 July 2023 with respect to scheduled debt service obligations under the Applicant’s outstanding US$300m convertible bonds (the “Bonds”).³ The Bonds originally were issued on 16 July 2021 with a five-year maturity date and a 5.25% interest rate under terms of an indenture governed by New York law.⁴ The Bonds were listed on the main board of the Singapore Exchange Securities Trading Limited (the “SGX-ST”).⁵

The real estate crisis in Vietnam was an external economic circumstance not directly related to the Applicant itself, and it became evident that the Bonds that were then in default needed to be restructured for the mutual benefit of all parties. The payment default served as the catalyst for restructuring discussions between the Applicant and certain initial bondholder representatives (the “Initial Supporting Holders”).⁶ The discussions among the parties resulted in an agreement in principle to defer and capitalise unpaid interest, extend the maturity date applicable to repayment of the Bonds, and modify certain key economic attributes of the Bonds and rights of the bondholders. It appears that the parties recognised early in the process that a consensual solution to the structural problem of a still disrupted and unpredictable real estate market in Vietnam was in the best interest of everyone involved.

In pursuit of an agreement on terms and the means of implementation of a restructuring, the Applicant negotiated with the Initial Supporting Holders with the aim of laying the groundwork for a consensual restructuring of the Bonds to be effectuated either through a fully consensual out-of-court agreement or a scheme of arrangement to be put forward and become effective under Singapore law.⁷ These negotiations produced an agreement on a so-called “transaction support letter” dated 14 December 2023 that includes many of the same restructuring terms now embodied in the pre-packaged scheme of arrangement (the “Scheme”) as proposed by the Applicant and as supported by all bondholders who voted on the Scheme (together with the Initial Supporting Holders, the “Supporting Holders”).⁸

The sanction hearing

The Application was filed with the Court on 11 April 2024, and was presented to the Court for approval at a virtual hearing on the merits of the requested relief that took place on 26 April 2024 (the “Sanction Hearing”). The Sanction Hearing included persuasive showings of the Applicant’s rigorous and substantial efforts to comply with procedures of the Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed) (the “IRDA”) that allow qualifying schemes to be approved without having to first convene a meeting of creditors to vote on the proposed scheme, so long as the stated requirements of s 71 concerning the fairness of the process, the adequacy of information furnished to creditors and compliance with other procedural safeguards, are met. Professionals acting on behalf of the Applicant, as described in greater detail below, satisfied the statutory standards prescribed by s 71 of the IRDA and appeared to meet or exceed these standards. In short, disclosure here, as shown in supporting affidavits and related argument of counsel, was extremely clear, detailed, and well-coordinated.

At the uncontested Sanction Hearing, the Court heard and considered the arguments presented and granted all prayers for the relief sought by the Applicant. At the conclusion of the Sanction Hearing, the Court expressed appreciation to the parties for a well-executed and administered restructuring process that fully complied with the provisions of s 71 of the IRDA. The total elapsed time from case commencement to sanction of the Scheme was just 15 days.

The Sanction Hearing was orderly and comprehensively covered all relevant legal issues presented by the Application. The success of this expedited judicial process was due in large measure to the planning and diligence of the professionals and their careful attention to detail. The Applicant and the Supporting Holders anticipated the needs of the restructuring, were well prepared and succeeded in building a strong consensus within the bondholder constituency long before coming to Court.

The eventual acceptance of the Scheme by all voting stakeholders created what appeared to be deal momentum of its own. In recognition of the presence of such overwhelming support for the Scheme and with awareness of the limited time available to obtain an order approving the Scheme, the Court concluded that it was appropriate to move the process along as quickly as reasonably possible.

The date of the Sanction Hearing was initially set for 30 April 2024, but, at the Applicant’s request, was moved to the earlier date of 26 April 2024, to add a buffer of a few additional days before the outside date for implementing the Scheme mandated by the Scheme documentation. Thus, the judicial phase of the Scheme approval process was extremely truncated, and essentially all the hard work to restructure the Bonds was accomplished out-of-court by the parties themselves, either in anticipation of or following the Sanction Hearing.

Every participating bondholder accepted the Scheme (25 bondholders voted in favour constituting 95.11% of the outstanding Bonds), and not a single bondholder objected.⁹ That near perfect percentage indicated that a most effective job had been done in managing the flow of information and soliciting support for the proposed restructuring in comparison with the undesirable alternative of a failed process.

The overwhelming endorsement of the Scheme by so many affected stakeholders was also indicative of diligent and effective communication and execution. Descriptive materials and copies of implementing documentation were transmitted to creditors utilising communication channels approved by the Court. Bondholders were given relevant information in sufficient detail to enable them to understand and properly evaluate the benefits of the Scheme in comparison with foreseeable detriments to be suffered in a potential liquidation. The result of this robust notice and disclosure was a hearing in which the Court could see a relationship between the procedures used to inform the bondholders and the resulting acceptances. The functional suitability of the disclosure measures, in effect, had been verified by means of the very strong stakeholder support for the Scheme.

This case provides an opportunity for the Court to review the statutory underpinnings of the Court’s jurisdiction, and to consider what can be gleaned from the procedures that were followed in this first-of-its-kind pre-pack for a regional enterprise. These grounds of decision address the legal issues considered by the Court in relation to the Scheme, review certain authorities applicable to pre-pack schemes in Singapore, and consider whether greater efficiencies and reduced burdens on parties and their professional advisors may be feasible as the practice in this area continues to develop, particularly in connection with the disclosure of essential financial information needed to make an informed decision on any scheme of arrangement.

In the sections that follow, the Court discusses (a) the application of Part 5 of the IRDA to foreign unregistered companies such as the Applicant, (b) the predicates for the Court’s authority to exercise jurisdiction over such companies and (c) the satisfaction of the statutory requirements of s 71 of the IRDA. The Court takes this opportunity to provide guidance that may be helpful in relation to pre-packaged schemes for unregistered foreign companies that may be proposed in the future under the provisions of s 71 of the IRDA.

Issues to be determined

The issues to be determined in this decision were whether the Applicant, a foreign unregistered company, demonstrated that it qualified for relief under Part 5 of the IRDA and whether the Applicant was entitled to the grant of such relief in the SICC. A further issue was whether pre-filing disclosure of information performed properly in accordance with normal and customary practices in the restructuring community were in compliance with the disclosure requirements stated in s 71(3) of the IRDA.

The Applicant had substantial connections to Singapore and qualified for relief under Part 5 of the IRDA

As mentioned in the preceding section of this decision...